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Canada: MAP statistics for 2018

Canada: MAP statistics for 2018

The Canada Revenue Agency (CRA) released a report of the mutual agreement procedure (MAP) program—providing a summary of the MAP program for the 2018 calendar year.

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Canada was recognized by the OECD's Forum on Tax Administration for its MAP performance in 2018 for:

  • Best average completion time for resolving transfer pricing cases (just under 25 months)
  • Best cooperation, transfer pricing cases—Canada and United States (represents 54% of MAP cases)
  • Biggest case inventory decrease (16%)


Completed cases

The CRA concluded fewer negotiable MAP cases in 2018 than in the previous year (126 in 2018, and 141 in 2017). Negotiable MAP cases require negotiation to resolve a tax issue, rather than simply applying a tax treaty's terms. However, in 2018, there was an overall 16% decrease in caseload inventory.

  • Canadian cases: Canadian-initiated cases continue to dominate the MAP process. In 2018, 77% of completed cases were initiated in Canada.
  • Average completion time: The MAP report indicates that the average time to complete competent authority negotiations in 2018 remained close to target. The CRA target for completion times is 24 months for both foreign and Canadian-initiated adjustments. In 2018, the average completion time of Canadian-initiated adjustments was just under 22 months (down from just over 24 months in 2017).
    • Foreign-initiated adjustments in 2018 were completed on average in just under 26 months (up from just under 14 months in 2017, and almost 24 months in 2016).
    • Overall, the average time to complete negotiable cases was just under 23 months.

 

Relief obtained

Of the 126 negotiable MAP cases closed in 2018, just over 80% of taxpayers who sought assistance obtained full relief from double taxation, and approximately 6% received unilateral relief. However, in some cases, taxpayers did not obtain relief for various reasons (i.e., their objection was not justified, the request was withdrawn by the taxpayer or the issue was resolved via a domestic remedy, etc.).


Inventories of files

  • Transfer pricing cases: Transfer pricing cases (which the MAP report calls "attribution/allocation cases") are categorized as negotiable cases and require negotiation to resolve an issue (rather than just applying the terms of the tax treaty). At year-end, 78% of negotiable cases were transfer pricing cases. The CRA's inventory of transfer pricing cases decreased in 2018. It accepted 75 new cases and completed 102 cases. On average, these transfer pricing cases were closed in just under 25 months.
  • Cases not involving foreign tax authorities: There was a significant decrease (288 cases) in the CRA's non-negotiable MAP cases in 2018 (cases in which the foreign tax authority is not involved), from 407 to 119. These cases largely relate to elections under the Canada-United States treaty to defer taxation on undistributed pension income. Based on the report, the decrease reflects increased staff and a push to close-out aging cases.

 

Recent developments

The report also acknowledges the effect of Canada's ratification of the "Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting" (the multilateral instrument of MLI), which took place in August 2019. The MLI entered into force for Canada on 1 December 2019, and it modifies many of Canada's tax treaties and may affect treaty time limits and other MAP-related treaty provisions. For example, the amount of time to request MAP assistance may be extended from two years to three. The MLI also introduces mandatory binding arbitration to resolve certain classes of MAP disputes into some treaties.

The CRA stated it continues to work on updating its MAP and APA guidance.

Read a January 2020 report prepared by the KPMG member firm in Canada

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